Victoria and Western Australia swept the boards in the latest league table of the nation's residential ‘hotspots’, with the Australian Capital Territory also putting in a strong performance, according to the annual HIA Population and Residential Building Hotspots report.

The report provides an overview of Australia's fastest growing metropolitan and regional areas in 2011/12. A ‘hotspot’ is defined as a local area where population growth exceeds the national rate (which was 1.6% in the year to June 2012) and where the value of residential building work approved is in excess of $100 million.

For the second consecutive year, Victoria dominated the hotspots rankings with the state accounting for ten of the national top 20. Western Australia also had a strong year, with the state represented four times in the national top 20 ranking. The ACT punched well above its weight, providing two hotspots to the national top 20. New South Wales also had two hotspots in the same category, a welcome development following no entries in last year's list, while Queensland and the Northern Territory each made one contribution.

"Residential building activity is in decline in Victoria and the ACT, but is heading south from record levels. It is no surprise these two regions still feature prominently in the top 20 list,” says HIA chief economist, Harley Dale. “WA, meanwhile, is seeing a recovery in new home building this year and four spots in the top 20 list provide an indication of the potential in the west.”

Bonner in the ACT was Australia's top building and population Hotspot in 2011/12 with $171 million worth of residential building work approved and a population growth rate of 100%, reflecting the relatively new history of this area.

The second-placed Hotspot was Forrestdale-Harrisdale-Piara Waters in WA with $143 million worth of residential building work approved and a population growth rate of 23.5%. Yanchep in WA ranked third where in 2011/12 the value of residential building work approved was over $102 million and the population growth rate was 18.8%.

The top-five list was rounded out by Baldivis in WA, followed by Tarneit in Victoria.

"In total there are 68 hotspots identified and many more areas where population growth is relatively fast or where the value of approvals for new homes or larger alterations and additions is quite healthy," says Dale. "There is clearly considerable potential for residential construction work in Australia - for a start, six of Australia's eight states and territories feature in the national top 20 hotspots list."

"The 'disconnect' comes from an insufficient amount of this potential being realised this year in terms of actual residential construction activity. With interest rates falling significantly we would normally be seeing far healthier levels of activity and compelling evidence of a sustainable recovery, but neither of these outcomes is forthcoming in mid-2013."

Dale says policy makers other than the RBA have a role to play in ensuring residential construction activity is aligned with the need to rebalance Australia’s economic growth.

"Success in such policy action would also necessarily be reflected in a more efficient and productive Australian economy.”